Shri Prakashbhai D. Thakkar, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-2(2)(5), RAJKOT-GUJARAT

ITA 119/RJT/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6482 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 21 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 04-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DM RINDANI
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ITA NO. 119/RJT/2017 ( / ASSESSMENT YEAR : 2007-08) SHRI PRAKASHBHAI DHIRUBHAI THAKKAR 49-B, PANCHAVATI SOCIETY STREET NO.3 KALAWAD ROAD, RAJKOT / VS. THE INCOME TAX OFFICER WARD-2(2)(5) RAJKOT ./ ./ PAN/GIR NO. : AAYPT4729R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI D.M. RINDANI, AR / RESPONDENT BY : SHRI PRAVEEN VERMA, SR.DR / DATE OF HEARING 13/02/2019 !'# / DATE OF PRONOUNCEMENT 20/02/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)2, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-2 /0251/2014-15 DATED 20/02/2017 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 23/03/2015 RELEVANT TO ASSESSMENT YEAR (AY) 2007-08. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- ITA NO.119/RJT/2017 SHRI PRAKASHBHAI DHIRUBHAI THAKKAR VS. ITO ASST .YEAR - 2007-08 - 2 - 1. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)- 2, RAJKOT HAS ERRED IN DISMISSING THE APPEAL AND WHEREBY UPHO LDING THE ACTION TAKEN BY THE AO FOR REOPENING THE ASSESSMENT AND PASSED THE ORDER U/S.143(3) R.W.S. 147 OF THE I T A CT IS UNWARRANTED, UNJUSTIFIED AND BAD IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-2 , RAJKOT HAS ERRED IN DISMISSING THE APPEAL AND WHEREBY UPHO LDING THE ASSESSED THE TOTAL INCOME OF RS.3,59,220/- AS AGAIN ST THE RETURNED INCOME OF RS.2,44,2290/- IS UNWARRANTED, U NJUSTIFIED AND BAD IN LAW. 3. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-2 , RAJKOT HAS ERRED IN DISMISSING THE APPEAL AND WHEREBY UPHO LDING THE MAKING THE ADDITION WITHIN THE MEANING OF SECTION 2 (22)(E) OF THE I T ACT AS DISCUSSED PARA 4,5 & 6 OF THE ASSESS MENT ORDER AND INTEREST INCOME ADDED TO THE TOTAL INCOME AMOUN TING TO RS.1,15,000/- IS UNWARRANTED, UNJUSTIFIED AND BAD I N LAW. 4. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-2 , RAJKOT HAS ERRED IN DISMISSING THE APPEAL AND WHEREBY UPHO LDING THE WRONGLY MENTIONED THE FACTS IN HIS BODY OF ORDER VI DE PARA 4, 5 & 6 IT IS TOTALLY AGAINST THE FACTS OF THE CASE AND PASSED THE ORDER AND REDUCED THE LOSS IS UNWARRANTED, UNJUSTIF IED AND BAD IN LAW. 3. AT THE TIME OF THE HEARING, THE ASSESSEE DID NOT ADVANCE ANY ARGUMENT CHALLENGING THE VALIDITY OF THE ASSESSMENT FRAMED U/S.143(3) R.W.S.147 OF THE ACT. THEREFORE, WE DISMISS THE S AME. 4. THE ONLY EFFECTIVE ISSUE RAISED BY THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSE SSING OFFICER BY HOLDING THE SUM OF RS.1,15,000/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. ITA NO.119/RJT/2017 SHRI PRAKASHBHAI DHIRUBHAI THAKKAR VS. ITO ASST .YEAR - 2007-08 - 3 - 5. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DRAWN HIS INCOME UNDER THE HEAD SALARY. THE ASSESSEE I S ALSO A DIRECTOR IN A PRIVATE LIMITED COMPANY, NAMELY PARTH LABORATORIES PVT.LTD. THE ASSESSEE IS A BENEFICIAL OWNER OF SHARES IN SUCH A COMPANY HOLDING 10.76% SHARES OF THE COMPANY. THE ASSESSING OFFICE R DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.1,15,000/ AS A LOAN FROM PARTH LABORATORIES PVT. LTD. WHICH IS DEEMED DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY, THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND TO THE TOTAL INCOME OF THE ASSES SEE. 6. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO TH E LD.CIT(A). THE ASSESSEE BEFORE THE LD.CIT(A) SUBMITTED THAT IT HAD TAKEN THE LOAN FROM THE COMPANY IN THE EARLIER YEARS FOR HOUSE CONSTRUC TION. AT THAT RELEVANT TIME, THE NET WORTH OF THE COMPANY WAS NEGATIVE. T HEREFORE, THE SAME CANNOT BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) O F THE ACT. 7. HOWEVER, THE LD.CIT(A) REJECTED THE CONTENTION O F THE ASSESSEE BY OBSERVING AS UNDER: HAVING CONSIDERED FACTS AND CIRCUMSTANCES OF THE C ASE I FIND THAT ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT THE FACTS THAT THE ASSESSEE HAD TAKEN LOAN OF RS.1,15,000/- FROM THE SAID COMPA NY DURING THE YEAR, HER SHARE HOLDING WAS 10.67%, AND THAT THE CO MPANY HAD ACCUMULATED PROFITS. THE CONTENTION OF ASSESSEE RE GARDING LOANS IN 1994-95 TO 1995-96 AND COMPANY HAVING LOSSES AT THAT TIME IS NOT RELEVANT DURING THE CURRENT YEAR. THE ASSESSEE HAS THUS FAILED TO SHOW HOW THE SAID LOAN DID NOT ATTRACT PROVISION S OF SECTION ITA NO.119/RJT/2017 SHRI PRAKASHBHAI DHIRUBHAI THAKKAR VS. ITO ASST .YEAR - 2007-08 - 4 - 2(22)(E). IN MY CONSIDERED OPINION THE CONTENTIONS OF THE ASSESSEE ARE NOT TENABLE AND ACTION OF A.O. CALLS FOR NO INT ERFERENCE. THE GROUND OF APPEAL IS REJECTED. 8. BEING AGGRIEVED BY THE ORDER OF LD.CIT(A), THE A SSESSEE IS NOW IN APPEAL BEFORE US. 9. THE LD.AR BEFORE US FILED A PAPER-BOOK RUNNING F ROM PAGE NOS.1 TO 6 AND SUBMITTED THAT THE ASSESSEE HAD NOT TAKEN ANY LOAN FROM THE COMPANY DURING THE YEAR. THEREFORE, THE SAME CANNO T BE TREATED AS INCOME OF THE ASSESSEE. THE LD.AR IN SUPPORT OF HIS CONTENTION DREW OUR ATTENTION ON THE COPIES OF THE LEDGER FOR THE P ERIOD 01-04-2004 TO 31- 03-2010 WHICH ARE AVAILABLE IN RECORD. 10. ON THE OTHER HAND, THE LD.DR VEHEMENTLY SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO AMBIGUITY THAT TH E PROVISIONS OF SECTION 2(22)9E) OF THE ACT WILL BE APPLIED IN THE YEAR IN WHICH THE SPECIFIED PERSON HAS TAKEN A LOAN FROM THE COMPANY. THE LD.A R BEFORE US FIRST TIME HAS TAKEN A PLEA THAT THE ASSESSEE HAS NOT REC EIVED ANY LOAN DURING THE YEAR. AS PER THE LD.AR, THE LOAN WAS TAKEN IN THE EARLIER YEARS AND IN THE YEAR UNDER CONSIDERATION PART OF IT WAS RE-PAID . 12. ON PERUSAL OF THE PAPER-BOOK, WE NOTE THAT ALL THESE DETAILS OF THE LOAN WERE AVAILABLE BEFORE THE AUTHORITIES BELOW, B UT THE PLEA THAT THE ITA NO.119/RJT/2017 SHRI PRAKASHBHAI DHIRUBHAI THAKKAR VS. ITO ASST .YEAR - 2007-08 - 5 - LOAN WAS TAKEN IN THE EARLIER YEARS WAS NOT TAKEN B EFORE THE AUTHORITIES BELOW. ON PERUSAL OF THE ORDER OF LD.CIT(A), WE NO TE THAT THE ASSESSEE HAS RECEIVED LOAN DURING THE YEAR. THUS, WE ARE O F THE VIEW THAT THE FACTS OF THE CASE ARE NOT VERY CLEAR. THEREFORE, WE ARE INCLINED TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH AD JUDICATION AS PER THE PROVISIONS OF LAW. WE ALSO DIRECT THAT IF THE ASSE SSEE HAS NOT TAKEN ANY LOAN DURING THE YEAR FROM THE COMPANY, THEN NO ADDI TION ON ACCOUNT OF DEEMED DIVIDEND IS WARRANTED. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 20 /02/2019 SD/- SD/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 20/02/2019 &.., .(.. / T.C. NAIR, SR. PS ITA NO.119/RJT/2017 SHRI PRAKASHBHAI DHIRUBHAI THAKKAR VS. ITO ASST .YEAR - 2007-08 - 6 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-2, RAJKOT 5. 012 ((*+ , *+# , !& /DR,ITAT, RAJKOT 6. 2=> ? / GUARD FILE. / BY ORDER, 0 ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, !& / ITAT, RAJKOT 1. DATE OF DICTATION ..13.2.2019 (DICTATION-PAD 11 - PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14.2.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S .. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.22.2.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 22.2.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER